Posted on 10/20/2004 2:40:59 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
If you think Pedro Martinez' numbers against the New York Yankees look bad (and they do), they're nothing compared with the government's latest monthly trade figures. Dismal as the Boston Red Sox ace's performance against the Bronx Bombers has been, he looks like a champion next to the trade numbers, which are one important measure of the U.S. economy's performance against the rest of the world.
Not that the trade surplus and deficit figures tell us everything we need to know about America's competitiveness. In particular, they compare apples and oranges – how U.S. products fare in overseas markets versus how foreign products do in U.S. markets. And even studying the trade figures industry by industry can be misleading. By definition, they can't shed light on which U.S. industries depend how heavily on exports and/or face major foreign competitors, and which U.S. industries sell mainly to the humongous U.S. market and/or face little import competition.
Still, according to mainstream economic theory, these trade balance figures say a great deal about the relative strength of America's economy, whether it is waxing or waning, and what its future composition will be. The reason? What a country trades most successfully – where it wracks up its biggest surpluses - eventually becomes what it makes most successfully and prolifically. And what it trades least successfully – where it wracks up its biggest deficits - eventually becomes what it makes least successfully and prolifically. That, in plain English, is what comparative advantage in all its forms is all about.
The deficits also show that the United States is a country that consumes far more than it produces. Although the economic price for this profligacy has appeared minor so far, anyone expecting the situation to last forever and is blasé about its worsening must believe there really are free lunches after all.
The August, 2004 trade figures released Oct. 14 by the Census Bureau show an overall U.S. deficit in goods and services of $54.04 billion, second all-time only to June´s $55.2 billion. This year´s January-August deficit level, as a result, is more than 19 percent larger than last year´s, meaning that the annual deficit figure is on its way to smashing last year´s $421 billion record total.
Even worse, the U.S. deficits keep soaring despite the soft patch recently encountered in domestic growth, and the gradual continued weakening of the dollar. The first is supposed to keep imports down and the second is supposed to buoy exports, but little of these macroeconomic effects are being felt.
Further, the closer one examines the deficit figures, the worse they look. Remember the rule that what a country trades most successfully it will wind up making most successfully? Well, by this logic, the United States doesn´t have much of a long-term future as a manufacturer. August´s manufacturing deficit was the second highest on record, and this year´s cumulative manufacturing deficit so far is more than 21 percent higher than last year´s January to August record total of $307.45 billion.
And don´t think that the problem is concentrated in so-called dinosaur, smokestack industries – which, incidentally, create most of America´s best-paying jobs on average. The $4.5 billion August deficit in advanced technology products set a new record, too.
Of course, many supporters of current U.S. trade policies see no special value in maintaining a world-class domestic manufacturing at all. But the August trade figures should scare them, too. America´s longstanding surplus in tradable services shrank by 19 percent, to $3.2 billion – the lowest surplus since the Census Bureau began tracking this trade in 1992. Since 2001, moreover, the January-August service surplus has declined a stunning 27 percent, to $33.07 billion. Still think that we can export our way out of our enormous national trade deficits and resulting debts by speeding up our shift to a service economy? Please!
Even more worrisome, much evidence indicates that the United States is also seeing its competitive edge erode in information technology and professional services – the supposed industries of the future, for which displaced manufacturing workers are supposed to reeducate and retrain themselves, and which America´s youth should target during their schooling.
The U.S. surplus in the “other private services” category, which captures trends in these sectors, did rise from $31.44 billion in the January-August, 2001 period to $33.15 billion in January-August, 2002. Since then, however, the surplus has fallen by 4.4 percent, including a fractional decrease in August, 2004, to $3.96 billion. In August, 2003, the surplus was $4.08 billion – 2.94 percent higher.
When America began losing older industries such as textile and apparel and steel, free trade cheerleaders predicted that the forces of comparative advantage would push the nation up the technology ladder to automobiles and ships and machine tools and consumer electronics. When these industries began faltering, Americans were told not to worry, for they would be freed up to concentrate on high tech goods like computers and semiconductors and aircraft and advanced telecoms equipment. When many of these industries began migrating en masse to high-income Japan and then low-income countries like China, professional services like law, engineering, and finance, and info-tech services like software writing were then declared the new economic future.
The latest trade figures show that these sectors won´t be saviors for the vast majority of America´s workforce, either – leaving two obvious alternatives. Americans´ comparative advantage will be in sales – hawking to each other the wares of other nations. Or maybe we´ll just all go back to the farm. But the only problem with that scenario is that farming is also under intensive attack from foreign competition.
I should amend this by saying that if GM or Ford introduced a car that had the same specs as a 1964 VW Beetle today, they wouldn't sell one--not one.
40 hp engine, no air conditioning, unsafe, etc., etc. The only reason people buy those things now is because people, strangely enough, are enamored with the past--as you seem to be. It wasn't always better, and the days weren't always good. Indeed, they are a helluva lot better now.
Nonsense. The Trade Deficit is a form of debt.
And the United States is the largest debtor nation in the world.
The trade deficit is a phony statistic, as most economists know. Seventy-five percent of our economy is made up of services, not goods
TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--
- establishing trade barriers on imports,
- reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or
- invading foreign countries with sizable armies.
Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.
SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.
Again, you are NOT paying more. Adjusted for inflation, you are NOT paying more. Adjusted for inflation, a Kia costs what a Volkswagen Beetle did.
Ok, you're paying a bigger percentage of your income in terms of real dollars. At the end of the day, then, no matter how you look at it, you're paying more.
It's just a different way of paying more. C'est la vie.
Could you give this guy the stats ?
This assumes, of course, that your statement about real income is correct. I'm not saying that it is, but for argument's sake...
Oh, so the purchase price is the same but the income to pay for it has dropped. Yes, it's called dropping real incomes.
But you get more. Again, one expects to pay more for more things.
Here is the source of your misunderstanding. You are equating the 1964 VW Beetle to the 2005 Kia (Rio, I guess?) as if they are the same thing. They are not. Once you realize that, then you begin to see why what you're saying doesn't make sense.
The technological difference between the cars is completely and totally beside the point. It's not as if the consumer has the choice of buying a 2005 car in 1964. He buys what is in front of him. He buys a car from a category, in this case, economy coupe. And the purchase price of the economy coupe has remained the same (and that probably goes across the board for all categories of cars. The first Mustang was about 5k. Multiply it by six and you get close to what a Mustang costs now.). Whether it is the same physical car is immaterial to the purchase price over time.
And whether the purchase price is a higher percentage of my income now than then does nothing to enrich GM. They are getting the same money. Saying they have raised prices by lowering my disposable income makes no sense.
Now if I am less able to purchase something for the same price today than I was forty years ago, it obviously means I don't have as much money to spend as I did then.
They cannot. They've tried.
That simply makes no sense. One cannot argue that real incomes are falling because contemporary cars are more "expensive" than "historical" cars, and when it's pointed-out that a contemporary car is dissimilar to a historical car, claim it's "immaterial."
Sorry, you're on your own.
My first car was a '66 Mustang...
and I won't be drawn into some silly debate as to whether a '64 VW or an '05 Kia is "better".
As far as I'm concerned, they're BOTH imported crap.
Or it means that you are unwilling to buy more car as you did previously.
I was talking about real income between then and now.
My point is that the entire issue of which car is better is meaningless. It is the purchase price that matters. And that has not changed while the ability of the average American to pay it has.
You distorted it completely.
The contemporary car costs the same that the historical car did. The price is the same. But apparently that price now takes twice as long to pay off.
We should be hearing from the homeless shortly.
That is the future for America.
Selling communist made crap at the local Mega Great Wall-Mart for below-poverty wages. Or maybe we will all be surfs of the few obscenely rich traitors that are raping the USA on a daily basis?
So-called "free trade" is killing the American Dream and the middle-class, one job at a time. The only way we can compete against communist slave labor is to become communist slaves ourselves.
I trust the majority of Americans will wake up to that fact soon and do something about it.
I just wonder how far the globalists will go to maintain their death grip on this country and its leaders, democrat and republican?
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